Neiman Marcus 2008 Annual Report Download - page 11

Table of Contents
Inventory Management
Our merchandising function is decentralized with separate merchandising functions for Neiman Marcus stores, Bergdorf
Goodman and Direct Marketing. Each merchandising function is responsible for the determination of the merchandise assortment and
quantities to be purchased and, in the case of Neiman Marcus stores, for the allocation of merchandise to each store. We currently
have approximately 400 merchandise buyers and merchandise planners.
The majority of the merchandise we purchase is initially received at one of our centralized distribution facilities. To support
our Specialty Retail stores, we utilize a primary distribution facility in Longview, Texas, a regional distribution facility in Dayton,
New Jersey and four regional service centers. We also operate two distribution facilities in the Dallas-Fort Worth area to support our
Direct Marketing operation.
Our distribution facilities are linked electronically to our various merchandising staffs to facilitate the distribution of goods to
our stores. We utilize electronic data interchange (EDI) technology with certain of our vendors, which is designed to move
merchandise onto the selling floor quickly and cost-effectively by allowing vendors to deliver floor-ready merchandise to the
distribution facilities. In addition, we utilize high-speed automated conveyor systems capable of scanning the bar coded labels on
incoming cartons of merchandise and directing the cartons to the proper processing areas. Many types of merchandise are processed in
the receiving area and immediately "cross docked" to the shipping dock for delivery to the stores. Certain processing areas are staffed
with personnel equipped with hand-held radio frequency terminals that can scan a vendor's bar code and transmit the necessary
information to a computer to record merchandise on hand. We utilize third-party carriers to distribute our merchandise to individual
stores.
With respect to the Specialty Retail stores, the majority of the merchandise is held in our retail stores. We primarily operate
on a pre-distribution model through which we allocate merchandise on our initial purchase orders to each store. This merchandise is
shipped from our vendors to our distribution facilities for delivery to designated stores. We closely monitor the inventory levels and
assortments in our retail stores to facilitate reorder and replenishment decisions, satisfy customer demand and maximize sales.
Transfers of goods between stores are made primarily at the direction of merchandising personnel and, to a lesser extent, by store
management primarily to fulfill customer requests.
We also maintain certain inventories at the Longview distribution facility. The goods held at the Longview distribution
facility consist primarily of goods held in limited assortment or quantity by our stores and replenishment goods available to stores
achieving high initial sales levels. With our "locker stock" inventory management program, we maintain a portion of our most in-
demand and high fashion merchandise at our distribution facilities. For products stored in locker stock, we can ship replenishment
merchandise to the stores that demonstrate the highest customer demand. In addition, our sales associates can use the program to ship
items directly to our customers, thereby improving customer service and increasing productivity. This program also helps us to
restock inventory at individual stores more efficiently, to maximize the opportunity for full-price selling and to minimize the potential
risks related to excess inventories.
Capital Investments
We make capital investments annually to support our long-term business goals and objectives. We invest capital in new and
existing stores, distribution and support facilities as well as information technology. We have gradually increased the number of our
stores over the past ten years, growing our full-line Neiman Marcus and Bergdorf Goodman store base from 28 stores at the beginning
of fiscal year 1999 to our current 43 stores.
We invest capital in the development and construction of new stores in both existing and new markets. We conduct extensive
demographic, marketing and lifestyle research to identify attractive retail markets with a high concentration of our target customers
prior to our decision to construct a new store. We compete with other retailers for real estate opportunities principally on the basis of
our ability to attract customers. In addition to the construction of new stores, we also invest in the on-going maintenance of our stores
to ensure an elegant shopping experience for our customers. Capital expenditures for existing stores range from minor renovations of
certain areas within the store to major remodels and renovations and store expansions. We are focused on operating only in attractive
markets that can profitably support our stores as well as maintaining the quality of our stores and, consequently, our brand. With
respect to our major remodels, we only expand after extensive analysis of our projected returns on capital. We generally experience an
increase in both total sales and sales per square foot at stores that undergo a remodel or expansion.
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